Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify a Level 2 Subscriber Fee, 72740-72744 [2013-28845]

Download as PDF 72740 Federal Register / Vol. 78, No. 232 / Tuesday, December 3, 2013 / Notices 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of NSCC and on NSCC’s Web site (http://dtcc.com/legal/rule_filings/nscc/ 2013.php). All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NSCC–2013–12 and should be submitted on or before December 24, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–28846 Filed 12–2–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70945; File No. SR– NASDAQ–2013–142] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify a Level 2 Subscriber Fee November 26, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 14, 2013, The NASDAQ Stock Market LLC (‘‘NASDAQ’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by NASDAQ. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. emcdonald on DSK67QTVN1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change NASDAQ proposes to modify the NASDAQ Level 2 Professional Subscriber fee set forth in NASDAQ Rule 7023(b)(1)(B). NASDAQ will implement the proposed revised fee on January 1, 2014. The text of the proposed rule change is below. Proposed new language is in 7 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 17:36 Dec 02, 2013 7023. NASDAQ Depth-of-Book Data (a) No change. (b) Subscriber Fees. (1) NASDAQ Level 2 (A) No change. (B) Professional Subscribers pay a monthly fee of $4[0]5 each for Display Usage based upon Direct or Indirect Access, or for Non-Display Usage based upon Indirect Access only; (C)–(E) No change. (2)–(4) No change. (c)–(e) No change. * * * * * II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NASDAQ included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. NASDAQ has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose NASDAQ is proposing a change to modify the NASDAQ Level 2 Professional Subscriber fee (‘‘Level 2 fee’’) as set forth in NASDAQ Rule 7023(b)(1)(B). NASDAQ Rule 7023(b)(1)(B) currently provides for a monthly fee of $40 for Professional Subscribers each for any Display Usage based upon Direct or Indirect Access, or for Non-Display Usage based upon Indirect Access only. Specifically, NASDAQ proposes to increase this display fee from $40 per month to $45 per month. NASDAQ Level 2 NonProfessional Subscriber fees will remain unchanged. The NASDAQ Level 2 product is completely optional. NASDAQ has enhanced this product through capacity upgrades and regulatory data sets over the last approximately 30 years, but has only once increased the associated 3 Changes are marked to the rules of The NASDAQ Stock Market LLC found at http:// NASDAQomx.cchwallstreet.com/. 1 15 VerDate Mar<15>2010 italics; proposed deletions are bracketed.3 * * * * * Jkt 232001 PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 Professional Subscriber fee.4 During this time period, the network capacity for NASDAQ Level 2 has increased from a 56 Kb feed in 1983 to the current 30 Mb feed. Additionally, since NASDAQ Level 2 is also used for market making functions, NASDAQ has invested over the years to add regulatory data sets, such as Market Maker Mode and Trading Action status. Such investments are expected to continue in 2014 by the addition of enhanced Symbol Directory and IPO messaging, as well as latency monitoring tools to the feed. Aside from the one other Level 2 Subscriber fee change previously mentioned, the only other usage fee change NASDAQ has made in the last approximately 30 years was to add a Non-Professional fee option for NASDAQ Level 2, which is widely used by online brokerage firms today. As noted above, this increase represents only the second Professional Subscriber price change for display usage of NASDAQ Level 2 user fees since its introduction in 1983. b. Statutory Basis NASDAQ believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,5 in general, and with Section 6(b)(4) and 6(b)(5) of the Act,6 in particular, in that it provides an equitable allocation of reasonable fees among Subscribers and recipients of NASDAQ data and is not designed to permit unfair discrimination between them. In adopting Regulation NMS, the Commission granted self-regulatory organizations and broker-dealers increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also spur innovation and competition for the provision of market data. The Commission concluded that Regulation NMS—by lessening the regulation of the market in proprietary data—would itself further the Act’s goals of facilitating efficiency and competition: [E]fficiency is promoted when brokerdealers who do not need the data beyond the prices, sizes, market center identifications of the NBBO and consolidated last sale information are not required to receive (and pay for) such data. The Commission also believes that efficiency is promoted when broker-dealers may choose to receive (and pay for) additional market data based on their 4 See Securities Exchange Act Release No. 68493 (December 20, 2012), 77 FR 76574 (December 28, 2012) (SR–NASDAQ–2012–133). 5 15 U.S.C. 78f. 6 15 U.S.C. 78f(b)(4) and (5). E:\FR\FM\03DEN1.SGM 03DEN1 Federal Register / Vol. 78, No. 232 / Tuesday, December 3, 2013 / Notices emcdonald on DSK67QTVN1PROD with NOTICES own internal analysis of the need for such data.7 By removing ‘‘unnecessary regulatory restrictions’’ on the ability of exchanges to sell their own data, Regulation NMS advanced the goals of the Act and the principles reflected in its legislative history. If the free market should determine whether proprietary data is sold to broker-dealers (‘‘BDs’’) at all, it follows that the price at which such data is sold should be set by the market as well. Level 2 is precisely the sort of market data product that the Commission envisioned when it adopted Regulation NMS. On July 21, 2010, President Barack Obama signed into law H.R. 4173, the Dodd- Frank Wall Street Reform and Consumer Protection Act of 2010 (‘‘Dodd-Frank Act’’), which amended Section 19 of the Act. Among other things, Section 916 of the Dodd-Frank Act amended paragraph (A) of Section 19(b)(3) of the Act by inserting the phrase ‘‘on any person, whether or not the person is a member of the selfregulatory organization’’ after ‘‘due, fee or other charge imposed by the selfregulatory organization.’’ As a result, all self-regulatory organization (‘‘SRO’’) rule proposals establishing or changing dues, fees, or other charges are immediately effective upon filing regardless of whether such dues, fees, or other charges are imposed on members of the SRO, non-members, or both. Section 916 further amended paragraph (C) of Section 19(b)(3) of the Act to read, in pertinent part, ‘‘At any time within the 60-day period beginning on the date of filing of such a proposed rule change in accordance with the provisions of paragraph (1) [of Section 19(b)], the Commission summarily may temporarily suspend the change in the rules of the self-regulatory organization made thereby, if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of this title. If the Commission takes such action, the Commission shall institute proceedings under paragraph (2)(B) [of Section 19(b)] to determine whether the proposed rule should be approved or disapproved.’’ The decision of the United States Court of Appeals for the District of Columbia Circuit in NetCoaliton v. SEC, 615 F.3d 525 (D.C. Cir. 2010) (‘‘NetCoalition I’’), upheld the Commission’s reliance upon competitive markets to set reasonable and equitably allocated fees for market 7 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005). VerDate Mar<15>2010 17:36 Dec 02, 2013 Jkt 232001 data. ‘‘In fact, the legislative history indicates that the Congress intended that the market system ‘evolve through the interplay of competitive forces as unnecessary regulatory restrictions are removed’ and that the SEC wield its regulatory power ‘in those situations where competition may not be sufficient,’ such as in the creation of a ‘consolidated transactional reporting system.’ NetCoaltion I, at 535 (quoting H.R. Rep. No. 94–229, at 92 (1975), as reprinted in 1975 U.S.C.C.A.N. 321, 323). The court agreed with the Commission’s conclusion that ‘‘Congress intended that ‘competitive forces should dictate the services and practices that constitute the U.S. national market system for trading equity securities.’ ’’ 8 For the reasons stated above, NASDAQ believes that the proposed fee is fair and equitable in accordance with Section 6(b)(4) of the Act, and not unreasonably discriminatory in accordance with Section 6(b)(5) of the Act. As described above, the proposed fee is based on pricing conventions and distinctions that exist in NASDAQ’s current fee schedule, and the fee schedules of other exchanges. These distinctions (top-of-book versus Depthof-Book, Professional versus nonProfessional Subscribers, Direct versus Indirect Access, Internal versus External Distribution) are each based on principles of fairness and equity that have helped for many years to maintain fair, equitable, and not unreasonably discriminatory fees, and that apply with equal or greater force to the current proposal. As described in greater detail below, if NASDAQ has calculated improperly and the market deems the proposed fees to be unfair, inequitable, or unreasonably discriminatory, firms can diminish or discontinue the use of their data because the proposed product is entirely optional to all parties. NASDAQ can discontinue offering a pricing alternative (as it has in the past) and firms can discontinue their use at any time and for any reason (as they often do), including due to their assessment of the reasonableness of fees charged. NASDAQ continues to establish and revise pricing policies aimed at increasing fairness and equitable allocation of fees among Subscribers. NASDAQ believes that periodically it must adjust the Depth-of-Book Subscriber fees to reflect market forces. Given that this fee change represents only the second Professional Subscriber price change for display usage of NASDAQ Level 2 user fees since its 8 NetCoalition PO 00000 Frm 00116 I, at 535. Fmt 4703 Sfmt 4703 72741 introduction in 1983, NASDAQ believes it is an appropriate time to adjust this fee to more accurately reflect the investments made to enhance this product through capacity upgrades and regulatory data sets added. This also reflects that the market for this Depthof-Book information is highly competitive and continually evolves as products develop and change. B. Self-Regulatory Organization’s Statement on Burden on Competition NASDAQ does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. Notwithstanding its determination that the Commission may rely upon competition to establish fair and equitably allocated fees for market data, the NetCoalition court found that the Commission had not, in that case, compiled a record that adequately supported its conclusion that the market for the data at issue in the case was competitive. NASDAQ believes that a record may readily be established to demonstrate the competitive nature of the market in question. There is intense competition between trading platforms that provide transaction execution and routing services and proprietary data products. Transaction execution and proprietary data products are complementary in that market data is both an input and a byproduct of the execution service. In fact, market data and trade execution are a paradigmatic example of joint products with joint costs. The decision whether and on which platform to post an order will depend on the attributes of the platform where the order can be posted, including the execution fees, data quality and price and distribution of its data products. Without the prospect of a taking order seeing and reacting to a posted order on a particular platform, the posting of the order would accomplish little. Without trade executions, exchange data products cannot exist. Data products are valuable to many end Subscribers only insofar as they provide information that end Subscribers expect will assist them or their customers in making trading decisions. The costs of producing market data include not only the costs of the data distribution infrastructure, but also the costs of designing, maintaining, and operating the exchange’s transaction execution platform and the cost of regulating the exchange to ensure its fair operation and maintain investor confidence. The total return that a trading platform earns reflects the E:\FR\FM\03DEN1.SGM 03DEN1 emcdonald on DSK67QTVN1PROD with NOTICES 72742 Federal Register / Vol. 78, No. 232 / Tuesday, December 3, 2013 / Notices revenues it receives from both products and the joint costs it incurs. Moreover, an exchange’s customers view the costs of transaction executions and of data as a unified cost of doing business with the exchange. A broker-dealer will direct orders to a particular exchange only if the expected revenues from executing trades on the exchange exceed net transaction execution costs and the cost of data that the broker-dealer chooses to buy to support its trading decisions (or those of its customers). The choice of data products is, in turn, a product of the value of the products in making profitable trading decisions. If the cost of the product exceeds its expected value, the broker-dealer will choose not to buy it. Moreover, as a broker-dealer chooses to direct fewer orders to a particular exchange, the value of the product to that broker-dealer decreases, for two reasons. First, the product will contain less information, because executions of the broker-dealer’s orders will not be reflected in it. Second, and perhaps more important, the product will be less valuable to that brokerdealer because it does not provide information about the venue to which it is directing its orders. Data from the competing venue to which the brokerdealer is directing orders will become correspondingly more valuable. Thus, an increase in the fees charged for either transactions or data has the potential to impair revenues from both products. ‘‘No one disputes that competition for order flow is ‘fierce’.’’ NetCoalition, at 24. However, the existence of fierce competition for order flow implies a high degree of price sensitivity on the part of broker-dealers with order flow, since they may readily reduce costs by directing orders toward the lowest-cost trading venues. A broker-dealer that shifted its order flow from one platform to another in response to order execution price differentials would both reduce the value of that platform’s market data and reduce its own need to consume data from the disfavored platform. Similarly, if a platform increases its market data fees, the change will affect the overall cost of doing business with the platform, and affected broker-dealers will assess whether they can lower their trading costs by directing orders elsewhere and thereby lessening the need for the more expensive data. Analyzing the cost of market data distribution in isolation from the cost of all of the inputs supporting the creation of market data will inevitably underestimate the cost of the data. Thus, because it is impossible to create data without a fast, technologically robust, and well-regulated execution system, VerDate Mar<15>2010 17:36 Dec 02, 2013 Jkt 232001 system costs and regulatory costs affect the price of market data. It would be equally misleading, however, to attribute all of the exchange’s costs to the market data portion of an exchange’s joint product. Rather, all of the exchange’s costs are incurred for the unified purposes of attracting order flow, executing and/or routing orders, and generating and selling data about market activity. The total return that an exchange earns reflects the revenues it receives from the joint products and the total costs of the joint products. Competition among trading platforms can be expected to constrain the aggregate return each platform earns from the sale of its joint products, but different platforms may choose from a range of possible, and equally reasonable, pricing strategies as the means of recovering total costs. For example, some platforms may choose to pay rebates to attract orders, charge relatively low prices for market information (or provide information free of charge) and charge relatively high prices for accessing posted liquidity. Other platforms may choose a strategy of paying lower rebates (or no rebates) to attract orders, setting relatively high prices for market information, and setting relatively low prices for accessing posted liquidity. In this environment, there is no economic basis for regulating maximum prices for one of the joint products in an industry in which suppliers face competitive constraints with regard to the joint offering. This would be akin to strictly regulating the price that an automobile manufacturer can charge for car sound systems despite the existence of a highly competitive market for cars and the availability of after-market alternatives to the manufacturer-supplied system. The market for market data products is competitive and inherently contestable because there is fierce competition for the inputs necessary to the creation of proprietary data and strict pricing discipline for the proprietary products themselves. Numerous exchanges compete with each other for listings, trades, and market data itself, providing virtually limitless opportunities for entrepreneurs who wish to produce and distribute their own market data. This proprietary data is produced by each individual exchange, as well as other entities, in a vigorously competitive market. Broker-dealers currently have numerous alternative venues for their order flow, including thirteen SRO markets, as well as internalizing BDs and various forms of alternative trading systems (‘‘ATSs’’), including dark pools and electronic communication networks PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 (‘‘ECNs’’). Each SRO market competes to produce transaction reports via trade executions, and two FINRA-regulated Trade Reporting Facilities (‘‘TRFs’’) compete to attract internalized transaction reports. Competitive markets for order flow, executions, and transaction reports provide pricing discipline for the inputs of proprietary data products. The large number of SROs, TRFs, BDs, and ATSs that currently produce proprietary data or are currently capable of producing it provides further pricing discipline for proprietary data products. Each SRO, TRF, ATS, and BD is currently permitted to produce proprietary data products, and many currently do or have announced plans to do so, including NASDAQ, New York Stock Exchange LLC (‘‘NYSE’’), NYSE MKT LLC, NYSE Arca LLC, BATS Exchange, Inc. (‘‘BATS’’) and Direct Edge. Any ATS or BD can combine with any other ATS, BD, or multiple ATSs or BDs to produce joint proprietary data products. Additionally, order routers and market data vendors can facilitate single or multiple broker-dealers’ production of proprietary data products. The potential sources of proprietary products are virtually limitless. The fact that proprietary data from ATSs, BDs, and vendors can by-pass SROs is significant in two respects. First, non-SROs can compete directly with SROs for the production and sale of proprietary data products, as BATS and Arca did before registering as exchanges by publishing Depth-of-Book data on the Internet. Second, because a single order or transaction report can appear in an SRO proprietary product, a non-SRO proprietary product, or both, the data available in proprietary products is exponentially greater than the actual number of orders and transaction reports that exist in the marketplace. Market data vendors provide another form of price discipline for proprietary data products because they control the primary means of access to end Subscribers. Vendors impose price restraints based upon their business models. For example, vendors such as Bloomberg and Thomson Reuters that assess a surcharge on data they sell may refuse to offer proprietary products that end Subscribers will not purchase in sufficient numbers. Internet portals, such as Google, impose a discipline by providing only data that will enable them to attract ‘‘eyeballs’’ that contribute to their advertising revenue. Retail broker-dealers, such as Schwab and Fidelity, offer their customers proprietary data only if it promotes E:\FR\FM\03DEN1.SGM 03DEN1 emcdonald on DSK67QTVN1PROD with NOTICES Federal Register / Vol. 78, No. 232 / Tuesday, December 3, 2013 / Notices trading and generates sufficient commission revenue. Although the business models may differ, these vendors’ pricing discipline is the same: they can simply refuse to purchase any proprietary data product that fails to provide sufficient value. NASDAQ and other producers of proprietary data products must understand and respond to these varying business models and pricing disciplines in order to market proprietary data products successfully. In addition to the competition and price discipline described above, the market for proprietary data products is also highly contestable because market entry is rapid, inexpensive, and profitable. The history of electronic trading is replete with examples of entrants that swiftly grew into some of the largest electronic trading platforms and proprietary data producers: Archipelago, Bloomberg Tradebook, Island, RediBook, Attain, TracECN, BATS Trading and Direct Edge. A proliferation of dark pools and other ATSs operate profitably with fragmentary shares of consolidated market volume. Regulation NMS, by deregulating the market for proprietary data, has increased the contestability of that market. While broker-dealers have previously published their proprietary data individually, Regulation NMS encourages market data vendors and broker-dealers to produce proprietary products cooperatively in a manner never before possible. Multiple market data vendors already have the capability to aggregate data and disseminate it on a profitable scale, including Bloomberg, and Thomson Reuters. The court in NetCoalition concluded that the Commission had failed to demonstrate that the market for market data was competitive based on the reasoning of the Commission’s NetCoalition order because, in the court’s view, the Commission had not adequately demonstrated that the Depth-of-Book data at issue in the case is used to attract order flow. NASDAQ believes, however, that evidence not before the court clearly demonstrates that availability of data attracts order flow. Competition among platforms has driven NASDAQ continually to improve its platform data offerings and to cater to customers’ data needs. For example, NASDAQ has developed and maintained multiple delivery mechanisms (IP, multi-cast, and compression) that enable customers to receive data in the form and manner they prefer and at the lowest cost to them. NASDAQ offers front end applications such as its ‘‘Bookviewer’’ VerDate Mar<15>2010 17:36 Dec 02, 2013 Jkt 232001 to help customers utilize data. NASDAQ has created new products like TotalView Aggregate to complement TotalView ITCH and/Level 2, because offering data in multiple formatting allows NASDAQ to better fit customer needs. NASDAQ offers data via multiple extranet providers, thereby helping to reduce network and total cost for its data products. NASDAQ has developed an online administrative system to provide customers transparency into their data feed requests and streamline data usage reporting. NASDAQ has also expanded its Enterprise License options that reduce the administrative burden and costs to firms that purchase market data. Despite these enhancements and a dramatic increase in message traffic, NASDAQ’s fees for market data have remained flat. In fact, as a percent of total Subscriber costs, NASDAQ data fees have fallen relative to other data usage costs—including bandwidth, programming, and infrastructure—that have risen. The same holds true for execution services; despite numerous enhancements to NASDAQ’s trading platform, absolute and relative trading costs have declined. Platform competition has intensified as new entrants have emerged, constraining prices for both executions and for data. The vigor of competition for Depth-ofBook information is significant and the Exchange believes that this proposal itself clearly evidences such competition. NASDAQ is increasing the fee in order to keep pace with changes in the industry and evolving customer needs. This product is entirely optional and is geared towards attracting new customers, as well as retaining existing customers. The Exchange has witnessed competitors creating new products and innovative pricing in this space over the course of the past year. NASDAQ continues to see firms challenge its pricing on the basis of the Exchange’s explicit fees being higher than the zeropriced fees from other competitors such as BATS. In all cases, firms make decisions on how much and what types of data to consume on the basis of the total cost of interacting with NASDAQ or other exchanges. Of course, the explicit data fees are but one factor in a total platform analysis. Some competitors have lower transactions fees and higher data fees, and others are vice versa. The market for this Depth-of-Book information is highly competitive and continually evolves as products develop and change. PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 72743 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.9 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2013–142 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NASDAQ–2013–142. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the 9 15 E:\FR\FM\03DEN1.SGM U.S.C. 78s(b)(3)(a)(ii). 03DEN1 72744 Federal Register / Vol. 78, No. 232 / Tuesday, December 3, 2013 / Notices proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal offices of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NASDAQ–2013–142, and should be submitted on or before December 24, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–28845 Filed 12–2–13; 8:45 am] BILLING CODE 8011–01–P SOCIAL SECURITY ADMINISTRATION Agency Information Collection Activities: Proposed Request and Comment Request The Social Security Administration (SSA) publishes a list of information collection packages requiring clearance by the Office of Management and Budget (OMB) in compliance with Public Law 104–13, the Paperwork Reduction Act of 1995, effective October 1, 1995. This notice includes revisions of OMB-approved information collections. SSA is soliciting comments on the accuracy of the agency’s burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility, and clarity; and ways to minimize burden on respondents, including the use of automated collection techniques or other forms of information technology. Mail, email, or fax your comments and recommendations on the information collection(s) to the OMB Desk Officer and SSA Reports Clearance Officer at the following addresses or fax numbers. (OMB) Office of Management and Budget, Attn: Desk Officer for SSA, Fax: 202–395–6974, Email address: OIRA_Submission@omb.eop.gov. (SSA) Social Security Administration, OLCA, Attn: Reports Clearance Director, 3100 West High Rise, 6401 Security Blvd., Baltimore, MD 21235, Fax: 410–966–2830, Email address: OR.Reports.Clearance@ssa.gov. I. The information collection below is pending at SSA. SSA will submit it to OMB within 60 days from the date of this notice. To be sure we consider your comments, we must receive them no later n February 3, 2014. Individuals can obtain copies of the collection instruments by writing to the above email address. Petition to Obtain Approval of a Fee for Representing a Claimant Before the Social Security Administration—20 CFR 404.1720 and 404.1725; 20 CFR 416.1520 and 416.1525—0960–0104. SSA attorney and non-attorney claimant representatives use Form SSA–1560–U4 to petition SSA for authorization to charge and collect a fee. Claimants may also use this form to agree with or contest the requested fee amount or other information the representative provided on the form. SSA officials use the form to determine a reasonable fee amount representatives may charge for their services. The respondents are attorneys and non-attorneys who represent Social Security claimants and their claimants. Type of Request: Revision of an OMBapproved information collection. Modality of completion Number of respondents Frequency of response Average burden per response (minutes) Estimated total annual burden (hours) SSA–1560–U4 ................................................................................................. 48,110 1 30 24,055 emcdonald on DSK67QTVN1PROD with NOTICES II. SSA submitted the information collections below to OMB for clearance. Your comments regarding the information collections would be most useful if OMB and SSA receive them 30 days from the date of this publication. To be sure we consider your comments, we must receive them no later than January 2, 2014. Individuals can obtain copies of the OMB clearance packages by writing to OR.Reports.Clearance@ ssa.gov. 1. Continuing Disability Review Report—20 CFR 404.1589, 416.989— 0960–0072. Sections 221(i), 1614(a)(3)(H)(ii)(I), and 1633(c)(1) of the Social Security Act require SSA to periodically review the cases of individuals who receive disability benefits under Title II or Title XVI to determine if the individuals’ disabilities continue. SSA uses Form SSA–454, Continuing Disability Review Report, to complete the review for continuing disability. SSA considers adults eligible for payment if they continue to be unable to do substantial gainful activity because of their impairments, and we Number of respondents Modality of completion SSA–454–BK (Paper version) ......................................................................... Electronic Disability Collect System ................................................................ 10 17 consider Title XVI children eligible for payment if they have marked and severe functional limitations because of their impairments. SSA also uses Form SSA– 454 to obtain information on sources of medical treatment; participation in vocational rehabilitation programs (if any); attempts to work (if any); and if individuals believe their conditions have improved. The respondents are Title II or Title XVI disability recipients or their representatives. Type of Request: Revision of an OMBapproved information collection. Frequency of response 270,500 270,500 1 1 CFR 200.30–3(a)(12). VerDate Mar<15>2010 18:56 Dec 02, 2013 Jkt 232001 PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 E:\FR\FM\03DEN1.SGM 03DEN1 Average burden per response (minutes) 60 60 Estimated total annual burden (hours) 270,500 270,500

Agencies

[Federal Register Volume 78, Number 232 (Tuesday, December 3, 2013)]
[Notices]
[Pages 72740-72744]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-28845]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70945; File No. SR-NASDAQ-2013-142]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify a Level 2 Subscriber Fee

November 26, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 14, 2013, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by NASDAQ. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    NASDAQ proposes to modify the NASDAQ Level 2 Professional 
Subscriber fee set forth in NASDAQ Rule 7023(b)(1)(B). NASDAQ will 
implement the proposed revised fee on January 1, 2014.
    The text of the proposed rule change is below. Proposed new 
language is in italics; proposed deletions are bracketed.\3\
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    \3\ Changes are marked to the rules of The NASDAQ Stock Market 
LLC found at http://NASDAQomx.cchwallstreet.com/.
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* * * * *

7023. NASDAQ Depth-of-Book Data

    (a) No change.
    (b) Subscriber Fees.
    (1) NASDAQ Level 2
    (A) No change.
    (B) Professional Subscribers pay a monthly fee of $4[0]5 each for 
Display Usage based upon Direct or Indirect Access, or for Non-Display 
Usage based upon Indirect Access only;
    (C)-(E) No change.
    (2)-(4) No change.
    (c)-(e) No change.
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NASDAQ included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NASDAQ has prepared summaries, set forth in Sections A, 
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ is proposing a change to modify the NASDAQ Level 2 
Professional Subscriber fee (``Level 2 fee'') as set forth in NASDAQ 
Rule 7023(b)(1)(B). NASDAQ Rule 7023(b)(1)(B) currently provides for a 
monthly fee of $40 for Professional Subscribers each for any Display 
Usage based upon Direct or Indirect Access, or for Non-Display Usage 
based upon Indirect Access only. Specifically, NASDAQ proposes to 
increase this display fee from $40 per month to $45 per month. NASDAQ 
Level 2 Non-Professional Subscriber fees will remain unchanged.
    The NASDAQ Level 2 product is completely optional. NASDAQ has 
enhanced this product through capacity upgrades and regulatory data 
sets over the last approximately 30 years, but has only once increased 
the associated Professional Subscriber fee.\4\ During this time period, 
the network capacity for NASDAQ Level 2 has increased from a 56 Kb feed 
in 1983 to the current 30 Mb feed. Additionally, since NASDAQ Level 2 
is also used for market making functions, NASDAQ has invested over the 
years to add regulatory data sets, such as Market Maker Mode and 
Trading Action status. Such investments are expected to continue in 
2014 by the addition of enhanced Symbol Directory and IPO messaging, as 
well as latency monitoring tools to the feed. Aside from the one other 
Level 2 Subscriber fee change previously mentioned, the only other 
usage fee change NASDAQ has made in the last approximately 30 years was 
to add a Non-Professional fee option for NASDAQ Level 2, which is 
widely used by online brokerage firms today. As noted above, this 
increase represents only the second Professional Subscriber price 
change for display usage of NASDAQ Level 2 user fees since its 
introduction in 1983.
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    \4\ See Securities Exchange Act Release No. 68493 (December 20, 
2012), 77 FR 76574 (December 28, 2012) (SR-NASDAQ-2012-133).
---------------------------------------------------------------------------

b. Statutory Basis
    NASDAQ believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general, and with Section 
6(b)(4) and 6(b)(5) of the Act,\6\ in particular, in that it provides 
an equitable allocation of reasonable fees among Subscribers and 
recipients of NASDAQ data and is not designed to permit unfair 
discrimination between them. In adopting Regulation NMS, the Commission 
granted self-regulatory organizations and broker-dealers increased 
authority and flexibility to offer new and unique market data to the 
public. It was believed that this authority would expand the amount of 
data available to consumers, and also spur innovation and competition 
for the provision of market data.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Commission concluded that Regulation NMS--by lessening the 
regulation of the market in proprietary data--would itself further the 
Act's goals of facilitating efficiency and competition:

    [E]fficiency is promoted when broker-dealers who do not need the 
data beyond the prices, sizes, market center identifications of the 
NBBO and consolidated last sale information are not required to 
receive (and pay for) such data. The Commission also believes that 
efficiency is promoted when broker-dealers may choose to receive 
(and pay for) additional market data based on their

[[Page 72741]]

own internal analysis of the need for such data.\7\
---------------------------------------------------------------------------

    \7\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496 (June 29, 2005).

    By removing ``unnecessary regulatory restrictions'' on the ability 
of exchanges to sell their own data, Regulation NMS advanced the goals 
of the Act and the principles reflected in its legislative history. If 
the free market should determine whether proprietary data is sold to 
broker-dealers (``BDs'') at all, it follows that the price at which 
such data is sold should be set by the market as well. Level 2 is 
precisely the sort of market data product that the Commission 
envisioned when it adopted Regulation NMS.
    On July 21, 2010, President Barack Obama signed into law H.R. 4173, 
the Dodd- Frank Wall Street Reform and Consumer Protection Act of 2010 
(``Dodd-Frank Act''), which amended Section 19 of the Act. Among other 
things, Section 916 of the Dodd-Frank Act amended paragraph (A) of 
Section 19(b)(3) of the Act by inserting the phrase ``on any person, 
whether or not the person is a member of the self-regulatory 
organization'' after ``due, fee or other charge imposed by the self-
regulatory organization.'' As a result, all self-regulatory 
organization (``SRO'') rule proposals establishing or changing dues, 
fees, or other charges are immediately effective upon filing regardless 
of whether such dues, fees, or other charges are imposed on members of 
the SRO, non-members, or both. Section 916 further amended paragraph 
(C) of Section 19(b)(3) of the Act to read, in pertinent part, ``At any 
time within the 60-day period beginning on the date of filing of such a 
proposed rule change in accordance with the provisions of paragraph (1) 
[of Section 19(b)], the Commission summarily may temporarily suspend 
the change in the rules of the self-regulatory organization made 
thereby, if it appears to the Commission that such action is necessary 
or appropriate in the public interest, for the protection of investors, 
or otherwise in furtherance of the purposes of this title. If the 
Commission takes such action, the Commission shall institute 
proceedings under paragraph (2)(B) [of Section 19(b)] to determine 
whether the proposed rule should be approved or disapproved.''
    The decision of the United States Court of Appeals for the District 
of Columbia Circuit in NetCoaliton v. SEC, 615 F.3d 525 (D.C. Cir. 
2010) (``NetCoalition I''), upheld the Commission's reliance upon 
competitive markets to set reasonable and equitably allocated fees for 
market data. ``In fact, the legislative history indicates that the 
Congress intended that the market system `evolve through the interplay 
of competitive forces as unnecessary regulatory restrictions are 
removed' and that the SEC wield its regulatory power `in those 
situations where competition may not be sufficient,' such as in the 
creation of a `consolidated transactional reporting system.' 
NetCoaltion I, at 535 (quoting H.R. Rep. No. 94-229, at 92 (1975), as 
reprinted in 1975 U.S.C.C.A.N. 321, 323). The court agreed with the 
Commission's conclusion that ``Congress intended that `competitive 
forces should dictate the services and practices that constitute the 
U.S. national market system for trading equity securities.' '' \8\
---------------------------------------------------------------------------

    \8\ NetCoalition I, at 535.
---------------------------------------------------------------------------

    For the reasons stated above, NASDAQ believes that the proposed fee 
is fair and equitable in accordance with Section 6(b)(4) of the Act, 
and not unreasonably discriminatory in accordance with Section 6(b)(5) 
of the Act. As described above, the proposed fee is based on pricing 
conventions and distinctions that exist in NASDAQ's current fee 
schedule, and the fee schedules of other exchanges. These distinctions 
(top-of-book versus Depth-of-Book, Professional versus non-Professional 
Subscribers, Direct versus Indirect Access, Internal versus External 
Distribution) are each based on principles of fairness and equity that 
have helped for many years to maintain fair, equitable, and not 
unreasonably discriminatory fees, and that apply with equal or greater 
force to the current proposal.
    As described in greater detail below, if NASDAQ has calculated 
improperly and the market deems the proposed fees to be unfair, 
inequitable, or unreasonably discriminatory, firms can diminish or 
discontinue the use of their data because the proposed product is 
entirely optional to all parties. NASDAQ can discontinue offering a 
pricing alternative (as it has in the past) and firms can discontinue 
their use at any time and for any reason (as they often do), including 
due to their assessment of the reasonableness of fees charged. NASDAQ 
continues to establish and revise pricing policies aimed at increasing 
fairness and equitable allocation of fees among Subscribers.
    NASDAQ believes that periodically it must adjust the Depth-of-Book 
Subscriber fees to reflect market forces. Given that this fee change 
represents only the second Professional Subscriber price change for 
display usage of NASDAQ Level 2 user fees since its introduction in 
1983, NASDAQ believes it is an appropriate time to adjust this fee to 
more accurately reflect the investments made to enhance this product 
through capacity upgrades and regulatory data sets added. This also 
reflects that the market for this Depth-of-Book information is highly 
competitive and continually evolves as products develop and change.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. Notwithstanding its 
determination that the Commission may rely upon competition to 
establish fair and equitably allocated fees for market data, the 
NetCoalition court found that the Commission had not, in that case, 
compiled a record that adequately supported its conclusion that the 
market for the data at issue in the case was competitive. NASDAQ 
believes that a record may readily be established to demonstrate the 
competitive nature of the market in question.
    There is intense competition between trading platforms that provide 
transaction execution and routing services and proprietary data 
products. Transaction execution and proprietary data products are 
complementary in that market data is both an input and a byproduct of 
the execution service. In fact, market data and trade execution are a 
paradigmatic example of joint products with joint costs. The decision 
whether and on which platform to post an order will depend on the 
attributes of the platform where the order can be posted, including the 
execution fees, data quality and price and distribution of its data 
products. Without the prospect of a taking order seeing and reacting to 
a posted order on a particular platform, the posting of the order would 
accomplish little. Without trade executions, exchange data products 
cannot exist. Data products are valuable to many end Subscribers only 
insofar as they provide information that end Subscribers expect will 
assist them or their customers in making trading decisions.
    The costs of producing market data include not only the costs of 
the data distribution infrastructure, but also the costs of designing, 
maintaining, and operating the exchange's transaction execution 
platform and the cost of regulating the exchange to ensure its fair 
operation and maintain investor confidence. The total return that a 
trading platform earns reflects the

[[Page 72742]]

revenues it receives from both products and the joint costs it incurs. 
Moreover, an exchange's customers view the costs of transaction 
executions and of data as a unified cost of doing business with the 
exchange. A broker-dealer will direct orders to a particular exchange 
only if the expected revenues from executing trades on the exchange 
exceed net transaction execution costs and the cost of data that the 
broker-dealer chooses to buy to support its trading decisions (or those 
of its customers). The choice of data products is, in turn, a product 
of the value of the products in making profitable trading decisions. If 
the cost of the product exceeds its expected value, the broker-dealer 
will choose not to buy it. Moreover, as a broker-dealer chooses to 
direct fewer orders to a particular exchange, the value of the product 
to that broker-dealer decreases, for two reasons. First, the product 
will contain less information, because executions of the broker-
dealer's orders will not be reflected in it. Second, and perhaps more 
important, the product will be less valuable to that broker-dealer 
because it does not provide information about the venue to which it is 
directing its orders. Data from the competing venue to which the 
broker-dealer is directing orders will become correspondingly more 
valuable.
    Thus, an increase in the fees charged for either transactions or 
data has the potential to impair revenues from both products. ``No one 
disputes that competition for order flow is `fierce'.'' NetCoalition, 
at 24. However, the existence of fierce competition for order flow 
implies a high degree of price sensitivity on the part of broker-
dealers with order flow, since they may readily reduce costs by 
directing orders toward the lowest-cost trading venues. A broker-dealer 
that shifted its order flow from one platform to another in response to 
order execution price differentials would both reduce the value of that 
platform's market data and reduce its own need to consume data from the 
disfavored platform. Similarly, if a platform increases its market data 
fees, the change will affect the overall cost of doing business with 
the platform, and affected broker-dealers will assess whether they can 
lower their trading costs by directing orders elsewhere and thereby 
lessening the need for the more expensive data.
    Analyzing the cost of market data distribution in isolation from 
the cost of all of the inputs supporting the creation of market data 
will inevitably underestimate the cost of the data. Thus, because it is 
impossible to create data without a fast, technologically robust, and 
well-regulated execution system, system costs and regulatory costs 
affect the price of market data. It would be equally misleading, 
however, to attribute all of the exchange's costs to the market data 
portion of an exchange's joint product. Rather, all of the exchange's 
costs are incurred for the unified purposes of attracting order flow, 
executing and/or routing orders, and generating and selling data about 
market activity. The total return that an exchange earns reflects the 
revenues it receives from the joint products and the total costs of the 
joint products.
    Competition among trading platforms can be expected to constrain 
the aggregate return each platform earns from the sale of its joint 
products, but different platforms may choose from a range of possible, 
and equally reasonable, pricing strategies as the means of recovering 
total costs. For example, some platforms may choose to pay rebates to 
attract orders, charge relatively low prices for market information (or 
provide information free of charge) and charge relatively high prices 
for accessing posted liquidity. Other platforms may choose a strategy 
of paying lower rebates (or no rebates) to attract orders, setting 
relatively high prices for market information, and setting relatively 
low prices for accessing posted liquidity. In this environment, there 
is no economic basis for regulating maximum prices for one of the joint 
products in an industry in which suppliers face competitive constraints 
with regard to the joint offering. This would be akin to strictly 
regulating the price that an automobile manufacturer can charge for car 
sound systems despite the existence of a highly competitive market for 
cars and the availability of after-market alternatives to the 
manufacturer-supplied system.
    The market for market data products is competitive and inherently 
contestable because there is fierce competition for the inputs 
necessary to the creation of proprietary data and strict pricing 
discipline for the proprietary products themselves. Numerous exchanges 
compete with each other for listings, trades, and market data itself, 
providing virtually limitless opportunities for entrepreneurs who wish 
to produce and distribute their own market data. This proprietary data 
is produced by each individual exchange, as well as other entities, in 
a vigorously competitive market.
    Broker-dealers currently have numerous alternative venues for their 
order flow, including thirteen SRO markets, as well as internalizing 
BDs and various forms of alternative trading systems (``ATSs''), 
including dark pools and electronic communication networks (``ECNs''). 
Each SRO market competes to produce transaction reports via trade 
executions, and two FINRA-regulated Trade Reporting Facilities 
(``TRFs'') compete to attract internalized transaction reports. 
Competitive markets for order flow, executions, and transaction reports 
provide pricing discipline for the inputs of proprietary data products.
    The large number of SROs, TRFs, BDs, and ATSs that currently 
produce proprietary data or are currently capable of producing it 
provides further pricing discipline for proprietary data products. Each 
SRO, TRF, ATS, and BD is currently permitted to produce proprietary 
data products, and many currently do or have announced plans to do so, 
including NASDAQ, New York Stock Exchange LLC (``NYSE''), NYSE MKT LLC, 
NYSE Arca LLC, BATS Exchange, Inc. (``BATS'') and Direct Edge.
    Any ATS or BD can combine with any other ATS, BD, or multiple ATSs 
or BDs to produce joint proprietary data products. Additionally, order 
routers and market data vendors can facilitate single or multiple 
broker-dealers' production of proprietary data products. The potential 
sources of proprietary products are virtually limitless.
    The fact that proprietary data from ATSs, BDs, and vendors can by-
pass SROs is significant in two respects. First, non-SROs can compete 
directly with SROs for the production and sale of proprietary data 
products, as BATS and Arca did before registering as exchanges by 
publishing Depth-of-Book data on the Internet. Second, because a single 
order or transaction report can appear in an SRO proprietary product, a 
non-SRO proprietary product, or both, the data available in proprietary 
products is exponentially greater than the actual number of orders and 
transaction reports that exist in the marketplace.
    Market data vendors provide another form of price discipline for 
proprietary data products because they control the primary means of 
access to end Subscribers. Vendors impose price restraints based upon 
their business models. For example, vendors such as Bloomberg and 
Thomson Reuters that assess a surcharge on data they sell may refuse to 
offer proprietary products that end Subscribers will not purchase in 
sufficient numbers. Internet portals, such as Google, impose a 
discipline by providing only data that will enable them to attract 
``eyeballs'' that contribute to their advertising revenue. Retail 
broker-dealers, such as Schwab and Fidelity, offer their customers 
proprietary data only if it promotes

[[Page 72743]]

trading and generates sufficient commission revenue. Although the 
business models may differ, these vendors' pricing discipline is the 
same: they can simply refuse to purchase any proprietary data product 
that fails to provide sufficient value. NASDAQ and other producers of 
proprietary data products must understand and respond to these varying 
business models and pricing disciplines in order to market proprietary 
data products successfully.
    In addition to the competition and price discipline described 
above, the market for proprietary data products is also highly 
contestable because market entry is rapid, inexpensive, and profitable. 
The history of electronic trading is replete with examples of entrants 
that swiftly grew into some of the largest electronic trading platforms 
and proprietary data producers: Archipelago, Bloomberg Tradebook, 
Island, RediBook, Attain, TracECN, BATS Trading and Direct Edge. A 
proliferation of dark pools and other ATSs operate profitably with 
fragmentary shares of consolidated market volume.
    Regulation NMS, by deregulating the market for proprietary data, 
has increased the contestability of that market. While broker-dealers 
have previously published their proprietary data individually, 
Regulation NMS encourages market data vendors and broker-dealers to 
produce proprietary products cooperatively in a manner never before 
possible. Multiple market data vendors already have the capability to 
aggregate data and disseminate it on a profitable scale, including 
Bloomberg, and Thomson Reuters.
    The court in NetCoalition concluded that the Commission had failed 
to demonstrate that the market for market data was competitive based on 
the reasoning of the Commission's NetCoalition order because, in the 
court's view, the Commission had not adequately demonstrated that the 
Depth-of-Book data at issue in the case is used to attract order flow. 
NASDAQ believes, however, that evidence not before the court clearly 
demonstrates that availability of data attracts order flow.
    Competition among platforms has driven NASDAQ continually to 
improve its platform data offerings and to cater to customers' data 
needs. For example, NASDAQ has developed and maintained multiple 
delivery mechanisms (IP, multi-cast, and compression) that enable 
customers to receive data in the form and manner they prefer and at the 
lowest cost to them. NASDAQ offers front end applications such as its 
``Bookviewer'' to help customers utilize data. NASDAQ has created new 
products like TotalView Aggregate to complement TotalView ITCH and/
Level 2, because offering data in multiple formatting allows NASDAQ to 
better fit customer needs. NASDAQ offers data via multiple extranet 
providers, thereby helping to reduce network and total cost for its 
data products. NASDAQ has developed an online administrative system to 
provide customers transparency into their data feed requests and 
streamline data usage reporting. NASDAQ has also expanded its 
Enterprise License options that reduce the administrative burden and 
costs to firms that purchase market data.
    Despite these enhancements and a dramatic increase in message 
traffic, NASDAQ's fees for market data have remained flat. In fact, as 
a percent of total Subscriber costs, NASDAQ data fees have fallen 
relative to other data usage costs--including bandwidth, programming, 
and infrastructure--that have risen. The same holds true for execution 
services; despite numerous enhancements to NASDAQ's trading platform, 
absolute and relative trading costs have declined. Platform competition 
has intensified as new entrants have emerged, constraining prices for 
both executions and for data.
    The vigor of competition for Depth-of-Book information is 
significant and the Exchange believes that this proposal itself clearly 
evidences such competition. NASDAQ is increasing the fee in order to 
keep pace with changes in the industry and evolving customer needs. 
This product is entirely optional and is geared towards attracting new 
customers, as well as retaining existing customers.
    The Exchange has witnessed competitors creating new products and 
innovative pricing in this space over the course of the past year. 
NASDAQ continues to see firms challenge its pricing on the basis of the 
Exchange's explicit fees being higher than the zero-priced fees from 
other competitors such as BATS. In all cases, firms make decisions on 
how much and what types of data to consume on the basis of the total 
cost of interacting with NASDAQ or other exchanges. Of course, the 
explicit data fees are but one factor in a total platform analysis. 
Some competitors have lower transactions fees and higher data fees, and 
others are vice versa. The market for this Depth-of-Book information is 
highly competitive and continually evolves as products develop and 
change.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\9\ At any time within 60 days of the filing 
of the proposed rule change, the Commission summarily may temporarily 
suspend such rule change if it appears to the Commission that such 
action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act. If the Commission takes such action, the Commission shall 
institute proceedings to determine whether the proposed rule should be 
approved or disapproved.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(a)(ii).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2013-142 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2013-142. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the

[[Page 72744]]

proposed rule change between the Commission and any person, other than 
those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room on official business 
days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such 
filing also will be available for inspection and copying at the 
principal offices of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NASDAQ-2013-142, and should be submitted on or before 
December 24, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-28845 Filed 12-2-13; 8:45 am]
BILLING CODE 8011-01-P